Tesla Finds a Home in Pennsylvania

States all over the country are battling with Tesla over franchise laws that prevent vehicle manufacturers from selling cars directly to consumers. But it looks like Tesla has found what it was looking for in Pennsylvania: A state that will allow it to bypass the traditional dealer system.

Yesterday, Pennsylvania Governor Tom Corbett (R) signed legislation that exempts electric vehicle manufacturers from state franchise laws that prevent auto manufacturers from selling directly to consumers. Pennsylvania law prevents OEMs operating corporate dealerships, but the Board of Motor Vehicle Manufacturers, under the State Department, licensed Tesla’s King of Prussia store in May of 2013.

What Tesla had on its side in Pennsylvania was car dealers themselves: The Pennsylvania Automotive Association – a roughly 1,000-member trade group for car dealers – supported the exemption. Dealers in New Jersey, Massachusetts and many other states — as well as the National Auto Dealers Association (NADA) — have taken the opposite tack, opposing Tesla’s plan to sell directly to consumers.

The National Auto Dealer’s Association (NADA) and its state subsidiaries have been working to inform consumers about the benefits of purchasing cars from a franchised dealer, rather than directly from the manufacturer. It produced a YouTube video that illustrates some real benefits, namely that the people you purchase the car from are local businesspeople, rather than some faceless company in — in Telsa’s case — California.

The video also cites the dealer’s incentive to perform recall work because it gets paid to perform it. An auto manufacturer — the NADA argues — would have no incentive to perform that work at a dealership that it owned outright.

Similarly, dealer groups argue that the trade-in is something that a dealer is intensely interested in, that an auto manufacturer really isn’t. Dealers rely on trade-ins as a ready supply of used car inventory, and customers would much rather take a lower trade-in price than face the inconvenience of selling the car themselves.

Tesla, on the other hand, has argued that it can provide a car to a consumer at a no-haggle price, from non-commissioned salespeople. The vision is similar to that of an Apple store. Consumers can purchase an iPhone from a local phone store, a Target, or any number of other retailers, or they can go directly to Apple and purchase the phone there.

Tesla now has the opportunity to prove its case in Pennsylvania. It has the ability to add four more stores on top of the King of Prussia store it operates now.